Displaying items by tag: retirement

The rise of fee-based annuities is accelerating as insurance firms respond to evolving regulations, especially in light of the Department of Labor’s fiduciary rule. These products, which charge transparent annual fees instead of embedded commissions, are designed to better align with client interests and reduce potential conflicts. 

However, while fee-based annuities may suit some investors, others—particularly long-term holders—might benefit more from commission-based options due to lower lifetime costs. 

Commissionable annuities, despite carrying higher built-in expenses, can eliminate ongoing advisory fees and may be better suited for clients who need less active management. Choosing between the two depends on several factors, including the annuity's fee structure, potential need for liquidity, and whether features like living benefits are added. 

Finsum: Ultimately, advisors and clients must carefully weigh these trade-offs to determine the best fit based on individual goals, timelines, and financial preferences.

Plan sponsors continue to grapple with low engagement and limited financial literacy when it comes to retirement income within defined contribution plans, according to a new DCIIA study. Many employers are hesitant to implement retirement income solutions due to competing priorities, legal risks, and a lack of internal resources or formal decumulation strategies. 

Complexity, lack of standardization, and concerns over liquidity and portability further complicate adoption. However, plan sponsors anticipate growing interest in lifetime income options through 2025 and 2026, especially as peer adoption increases. 

Safe harbor provisions from SECURE 2.0 are expected to encourage adoption by reducing perceived legal liability, and DCIIA will expand its research later this year to better understand these barriers and opportunities.

Finsum: Solutions that offer personalization, flexibility, and simplicity are most appealing, though widespread uptake may hinge on stronger education and clearer evaluation tools.

Annuities offer retirees a steady income stream, with fixed annuities providing guaranteed interest rates during the accumulation phase and predictable payouts in retirement. 

April 2025’s top fixed annuities include: Gainbridge’s SteadyPace at 5.80% over five years, Reliance Standard’s 5.00% option, and higher-premium offerings like MassMutual’s Premier Voyage 5, which reaches up to 4.90% for $1M+ investments. 

Rates generally vary by premium size and contract length, with most products requiring $10,000–$100,000 minimums and terms of three to five years. Fixed annuities also offer tax-deferred growth and can be customized with features like survivor or death benefits. However, higher returns often require larger upfront investments, and early withdrawals can trigger penalties. 

Despite their complexity, fixed annuities remain a useful tool for generating reliable retirement income, particularly for those seeking stability, tax deferral, and no contribution limits.

Target-date funds are designed for investors with a specific retirement date in mind, automatically adjusting their investment mix to become more conservative as that date approaches. 

These funds typically hold a variety of mutual funds rather than individual stocks or bonds, making them a diversified “fund of funds” that simplifies asset allocation. Early in an investor’s career, target-date funds emphasize growth by leaning heavily on equities, then gradually shift toward bonds to preserve capital as retirement nears. 

Each fund follows a predetermined glide path, which guides the transition from aggressive to conservative investments over time. Investors benefit from a hands-off approach, as the fund handles rebalancing and risk adjustments without the need for active management. 

Finsum: Overall, target-date funds offer a convenient, age-based solution that combines diversification, risk control, and simplicity in a single investment vehicle.

While overall annuity sales have cooled slightly from their post-pandemic highs, persistent economic unease may be fueling renewed demand. In Q1 2025, total annuity sales reached $105.4 billion—just 1% below the all-time high recorded in the same quarter last year, according to LIMRA. 

The organization attributes this strength to rising consumer anxiety, which in March drove sales to their second-highest monthly total on record. Registered index-linked annuities (RILAs) continued to shine, with sales up 21% year over year, bolstered by product innovation and growing interest from both insurers and investors. 

Meanwhile, fixed indexed annuities saw a 7% decline but still posted the fifth-highest quarterly sales ever at $26.7 billion. 

Finsum: For those looking for security with some upside in their retirement portfolios annuities products could provide an outlet.